January 29, 2020

How To Measure the Performance of Your Paid Ad Campaigns

8 min read

Written by: Isaac Desranleau  |  Share:

How to measure the performance of your paid ad campaigns

Measuring the performance of your campaigns is a key component of any successful paid advertising strategy.

Whenever you measure your paid campaigns’ performance, ensure you don’t limit your focus to one metric or a limited-scope of metrics. You don’t want to evaluate your paid performance in a vacuum. 

For example, you wouldn’t want to judge your campaigns solely on impressions. That wouldn’t tell you how well your ads convert contacts. 

Additionally, if your initial paid ad’s conversion doesn’t create a customer, it’s important to keep the ultimate purpose of your campaigns in mind. You might use paid to position guides that educate and nurture contacts toward becoming customers, so you shouldn’t solely look at initial ad conversions. Instead, you should also examine the bottom of your funnel and see how many customers certain campaigns, ads and keywords are impacting.  

Overall, you want to examine every aspect of your campaigns together before judging their performance. A keyword with extremely low impressions might close the most customers for your business — you just have to dig deeper to find out. 

With that in mind, let’s look at how to measure the performance of your paid ad campaigns.

Organize Your Ads

Recently, I had a conversation with New Breed’s Lead Search Strategist, Rider Gordon. He detailed some of the best practices for setting up and measuring your paid campaigns.

To start, it’s vital you have a goal for your campaigns in mind. Sometimes, you’ll have individual goals for each campaign, while in other scenarios, your campaigns could work together towards a common goal. 

Ultimately, your goals should be correlated to some kind of action you want your visitors to take. This could be buying a product, downloading an offer or signing up for a trial. As we mentioned in the introduction, it’s always important you keep this ultimate goal in mind when determining if your campaigns are successful or not. 

From there, you need to structure your ads, ensuring you can easily assess a campaign’s, ad group’s, ad’s or keyword’s performance in a logical, efficient fashion.

“What we want to do is group campaigns either by offer or by keyword topic,” says Rider. “By grouping it that way, we can have a close, one-to-one relation of the keyword that we’re targeting to the keyword found in ad copy. Then, we can create a landing page, or multiple landing pages, that mention the terms within that grouping. That’s the very broad structure of an account.”

Once you’ve launched campaigns using this structure, give them time before jumping to conclusions.

“Let [your campaigns] run for 90 days. Then, take a look at your broad metrics. Keep a close eye on cost per conversion, your volume of conversions and then your quality scores,” says Rider. “Once you get all of that data, then it’s time to start optimizing.” 

Before digging deeper, let’s explore some metrics, like the ones Rider just mentioned, that New Breed’s search team finds most valuable for measuring the performance of paid campaigns.

Download the Ultimate Paid Search Checklist to Construct a Paid Advertising  Strategy and Optimize Your PPC Ad Spend.

Track These Metrics

Impressions

Impressions measure how many times your ad was on screen, tracking the number of people who could have seen your ad as opposed to the actual number of views. A low amount of impressions indicates that your ad is not reaching many people, whereas a high number of impressions shows that your ad is reaching a wide audience. 

Depending on the objective you’re attempting to accomplish, you should expect differing levels of impressions. If you’re running a highly targeted campaign, you should probably expect low impressions, but if you’re trying to attract a large number of people, high impressions are preferred. 

Click rate

Your click rate (often referred to as “clicks”) is simply the sum of all the people who clicked your ad to learn more.

This metric demonstrates actual engagement. People who clicked your ad are potentially on their way to converting from visitors into leads.

Click-through rate

Click-through rate is different than click rate. It reveals the percentage of people who were served your ad that decided to click on it. In other words, this metric is calculated by dividing your click rate by your number of impressions. 

This metric shows the amount of interest your ad receives from the greater population of viewers. A high click-through rate could mean that your ad’s copy is effectively speaking to your target audience, but you need more information (like your conversion rate which we’ll discuss soon) before determining if that is the case. 

Cost-per-click

Cost per click (CPC) is the amount your company pays each time someone clicks on your advertisement. Of course, this total will vary by keyword, so you can optimize your CPC for each term you’re targeting.

Your company should determine a maximum price they are willing to pay for each keyword. This should be determined based on how the keyword aligns with your paid advertising budget and it should also leave enough room to promote any other keywords or offers you may have.

The amount you’re willing to pay on each click could change depending on the efficiency of your campaign. If you convert contacts at a high rate for a given keyword, you may be willing to pay more for each click. Of course, the opposite is also true. If a term doesn’t fuel many conversions, you might not be willing to spend as much. 

Conversions

Once someone clicks through to your ad’s landing page, they ideally will convert on your offer. Conversions are calculated by summing the number of people that executed the desired action you wanted them to take.

Of course, this depends on your goal. If your landing page is a product page, a conversion would involve a purchase. Alternatively, if you were trying to get visitors to acquire a gated piece of content, a conversion would involve them downloading the offer.

Conversion rate 

Conversion rate is a similar metric to click-through rate. It reveals the percentage of people who clicked-through to your ad that proceeded to convert on the offer. Conversion rate is calculated by dividing your number of conversions by your number of clicks. 

A high conversion rate indicates that people want your offer and that you’ve provided a good means for them to get it. Meanwhile, a low conversion rate could signal that your ad is not closely aligned with your landing page, that your landing page doesn’t speak to the true value of your offer or that you’re promoting the wrong offer for the audience you’re attracting.

Cost per conversion

Cost per conversion shows how much your business spent on your ad campaign compared to how many people converted. It is calculated by dividing your spend for a given period by the number of people who converted during that period.

Ideally, your cost per conversion should be low, meaning you are generating many conversions off from a limited spend. This means your spend is efficient, driving quality visitors to your website. On the other hand, if your cost per conversion is high, it could indicate you are wasting money targeting the wrong people. In that scenario, it might be time to re-evaluate your campaigns.

Quality score

“Quality score is definitely an all-encompassing metric,” says Rider. 

If you look at your Google ads account, quality score is broken down into three sub-metrics: expected click-through rate, landing page experience and ad relevance. Basically, the higher you score on each metric the higher your quality score will be. 

Expected click-through rate is based on how many people have previously clicked on your ads. It measures the likelihood that your ad is clicked for any given impression. 

Landing page experience measures the quality of your landing page in terms of its relevance and usefulness for visitors. Google states, “It takes into account factors such as how well your landing page content matches a person’s search term, and how easy it is for people to navigate your page.”

Ad relevance quantifies how your ad aligns with the keyword you are targeting. “A below average score may mean that your ads are too general or specific to answer the user’s query, or that this keyword isn’t relevant to your business,” Google writes.

Once these metrics are calculated, they are combined to give you a quality score for each keyword. The score is between one and ten (with ten being the highest). When a keyword scores between one and three, it needs significant improvement (focus on optimizing these terms first). A score of four through six reveals there’s room for improvement, but it’s not as critical (focus on these terms second). Finally, a score of seven and above leaves little to no room for improvement (there is no need to make any changes). 

“The higher your quality score the more impressions you get at a lower cost per click,” says Rider. “So, it’s rewarding people that are doing best practices.” 

Therefore, emphasizing quality score improvement is a wise decision.

Return on investment (ROI)

Overall, tracking the return on investment (ROI) of your paid campaigns is extremely important. The budget you devote to a paid advertising campaign needs to coincide with the financial opportunity associated with your overall goal. 

For example, if your goal is to advertise a new product, then you need to consider how much revenue you’ll generate from selling your product compared to the amount you’ll have to spend on advertising. 

If your product’s profit margin is $3,000, your ad generates 1 customer for every 30 contacts that convert on it and your average cost per contact is $100, you would only be breaking even with your ad. 

Total return: $3,000

Total investment: 30 x $100 = $3,000

ROI: $3,000 - $3,000 = 0

To have a positive ROI, you would need to increase your efficiency. That could involve closing more customers from the same size pool of contacts (e.g. improving your ad so it generated 2 customers for every 30 contacts).

Total return: 2 x $3,000 = $6,000

Total investment: 30 x $100 = $3,000

ROI: $6,000 - $3,000 = $3,000

Or, it could involve lowering your cost per contact (e.g. decreasing it to $90). 

Total return: $3,000

Total investment: 30 x $90 = $2,700

ROI: $3,000 - $2,700 = $300

Ultimately, this metric will help you objectively determine the revenue contribution of your ad and avoid wasting money.

Leverage HubSpot

Now that you know which metrics to track, you need software to track them. Here at New Breed, we suggest HubSpot.

Because everything in HubSpot is integrated, the platform allows you to see the people behind the conversions, keeping detailed records of every interaction a contact has on your site. Overall, this reveals something that is otherwise difficult to track — how paid search impacts deals. 

By tracking your contacts, you’ll know when a paid contact is created, which campaign they engaged with, if they’ve made other visits to your site and what else they might have interacted with. Overall, this provides much more granularity than most ads tools.

Rider revealed that one of his favorite tools in HubSpot is the ROI calculator which is visible on the ads home screen. Since HubSpot tracks contacts and deals, you can immediately see how your ad spend is impacting your bottom-line. 

The ad tool gives you a snapshot of your paid efforts, which is extremely useful for reporting purposes. You can easily change the timeframe you’re looking at, collecting information down to the day or out over the entire lifetime of your account. 

Additionally, you can isolate accounts and campaigns. For example, you might choose to examine your paid social campaigns separately from your paid search campaigns. Or, you might want to focus on one campaign, inspecting its individual performance.  

Overall, HubSpot provides an ideal resource for measuring your paid performance.

Key Takeaway

After tracking your ads and analyzing your metrics over time, the data you collect will reveal opportunities for you to improve. Without such data, you would have no means to inform your paid efforts and your attempts would be aimless. 

If you want to learn more about the other elements of a successful paid search campaign, check out our Ultimate Paid Search Checklist.

the_ultimate_paid_search_checklist

This post was originally published February 26, 2018.

Topics: Demand Generation, Reporting & ROI, SEO & Paid Search

About The Author

Isaac is an Internal Marketing Apprentice at New Breed. He recently graduated from the University of Vermont and his passion for the inbound philosophy of giving value to customers before extracting it brought him here. In his free time, he's an avid outdoorsman.

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